Solicitors “not dishonest”

A High Court judge was wrong to conclude that two solicitors were guilty of dishonest assistance in a breach of trust, the Court of Appeal has held.

The breach of trust was a mortgage fraud which resulted in the borrower obtaining all the proceeds of sale of large parts of the mortgaged property in fraud of the lender. Judge Pelling QC found the solicitors, Mr Murphy and Mr Denslow, guilty in 2013. Clydesdale Bank had accused the pair, who worked at national law firm Cobbetts before it closed and later moved to Shoosmiths, of being part of a conspiracy after they realised the bank’s charge had not been registered. However, the solicitors said they had decided to act in accordance with the instructions from their client. Judge Pelling found that the solicitors should have done more to check the bank’s position and held them partly responsible for the bank’s losses.

On appeal, however, Lord Justice Lewison said: “A finding of dishonesty, especially against a solicitor, should not be made without the most careful consideration of what the solicitor says in his own defence.”

Giving judgment in Clydesdale Bank v John Workman & Ors [2016] EWCA Civ 73, he added: “The case against Messrs Murphy and Denslow, as put to the judge, was one of participation in a sophisticated conspiracy hatched as soon as the company realised that the Bank’s charge had not been registered, and that Messrs Murphy and Denslow were in on it from the start. That case failed; and what the judge ultimately decided was far removed from the case that had been advanced.”